A federal court last week ruled that Comcast Corp. was not required to sell Philadelphia-area regional sports network Comcast SportsNet to its direct-broadcast satellite competitors.
The decision, handed down last Tuesday by a three-judge panel of the U.S Court of Appeals for the D.C. Circuit, affirmed prior Federal Communications Commission rulings that held that SportsNet falls outside the scope of the 1992 Cable Act's program-access rules because the network is not satellite-delivered.
Under FCC program-access rules, cable operators are barred from signing exclusive distribution deals with satellite-delivered networks that are owned in whole or in part by a cable operator, with rare exception.
The court held the FCC acted reasonably both in dismissing EchoStar's complaint and in denying a motion that would have required Comcast to substantiate alleged cost savings associated with terrestrial delivery.
Comcast SportsNet is the cable home of the National Hockey League's Philadelphia Flyers, the National Basketball Association's Philadelphia 76ers and Major League Baseball's Philadelphia Phillies. The MSO — the No. 3 cable company, with 8.4 million subscribers and plans to merge with No. 1 AT&T Broadband — owns the hockey and basketball teams, as well as the regional sports channel.
(Comcast also operates a second service in the Baltimore-Washington market under the SportsNet name. That network, the former Home Team Sports, was already distributed via satellite and carried by DBS providers before Comcast acquired it.)
Sports programming is considered a key asset in subscriber acquisition and retention. Both EchoStar and DirecTV Inc. have complained that Comcast's refusal to sell SportsNet has impaired their ability to compete in the Philadelphia market.
Comcast does sell SportsNet to terrestrial competitor RCN Corp., although RCN has complained in the past about contract terms.
In late 1997, EchoStar sought access to SportsNet, but Comcast refused. Because the network is distributed terrestrially rather than by satellite, Comcast said it was entitled to withhold the channel under FCC program-access rules.
In 1999, the FCC rejected EchoStar's complaint. The agency said SportsNet was not a satellite network covered by the rules, and that no evasion occurred because the channel was a new service that showed it would save hundreds of thousands of dollars a year by opting for terrestrial delivery.
In a 10-page opinion, Judge Douglas H. Ginsburg said the FCC interpreted the program-access rules based on a reasonable reading of the 1992 cable law.
"Because the decision of the commission is reasonable and is supported by substantial evidence, EchoStar's petition for review is denied," Ginsburg said.
A Comcast spokesman declined comment on the ruling.
Comcast has argued before the FCC that the agency should allow the exclusivity ban to expire on Oct. 5, 2002, in which case Comcast and other cable operators would be free to sign exclusive carriage deals with terrestrially delivered and satellite-delivered cable networks.
EchoStar and DirecTV have urged the FCC to expand the scope of the program-access rules to prohibit exclusivity between a cable operator and a terrestrially delivered network owned by a cable operator and between a cable operator and a cable network owned by entities not affiliated with cable operators.
EchoStar spokesman Marc Lumpkin said the company was disappointed with the court's ruling.
"The court's decision could open the floodgates to increased evasion of the program-access rules," he said. "Cable operators may increasingly use terrestrial program delivery to avoid selling key content to satellite-TV providers and other cable competitors."
Segments of the cable industry have complained that the program-access rules are unfair. They note that DirecTV, with its 10 million subscribers — larger than every cable company in the U.S., except AT&T Broadband and Time Warner Cable — is flourishing through its exclusive "NFL Sunday Ticket" out-of-market National Football League package.
Cable observers also note that EchoStar is now vertically integrated with USA Networks owner Vivendi Universal S.A., but EchoStar has said its carriage deals with Vivendi won't be exclusive.